Policy on Restructuring of Stressed Assets 2.0

A. Background:

The Reserve Bank of India had due to resurgence of Covid-19 pandemic in India in the recent weeks which has impact on the recovery process and create new uncertainties. With the objective of alleviating the potential stress to individual borrowers and small businesses, the RBI had announced set of measures on 5th May 2021, vide notification no DOR.STR.REC.11/21.04.048/2021-22. These set of measures are broadly in line with the contours of the Resolution Framework – 1.0, with suitable modifications.

Considering the above, the RBI provided a window that enabled the lenders to provide a resolution framework to the eligible borrowers for repayment of their loan by way of restructuring the loan or extending the tenure for repayment of the debt.

B. Definitions:

For the purposes of this policy, the below terms shall have the meaning as provided hereinunder:

  1. Board: The Board shall mean the Board of Directors or any authorized committee(s) of the board of the Company.
  2. Consumer credit: It refers to the loans given to individuals, which consists of (a) loans for consumer durables, (b) credit card receivables, (c) auto loans (other than loans for commercial use), (d) personal loans secured by gold, gold jewellery, immovable property, fixed deposits (including FCNR(B)), shares and bonds, etc., (other than for business / commercial purposes), (e) personal loans to professionals (excluding loans for business purposes), and (f) loans given for other consumptions purposes (e.g., social ceremonies, etc.). However, it excludes (a) education loans, (b) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), (c) loans given for investment in financial assets (shares, debentures, etc.), and (d) consumption loans given to farmers under KCC. For risk weighting purposes under the Capital Adequacy Framework, the extant regulatory guidelines will be applicable.
  3. Date of Invocation: The date of invocation means the date on which both the borrower and lender have agreed to proceed with a resolution plan for the Eligible Borrower in terms of this Policy. However, in no case the Date of Invocation be later than September 30, 2021
  4. Non-Eligible Borrower/s: Non-Eligible Borrowers shall mean the personnel or staff of the Company to whom it has extended credit facility or personal loans.
  5. Personal Loans: Personal loans refers to loans given to individuals and consist of (a) consumer credit, (b) education loan, (c) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), and (d) loans given for investment in financial assets (shares, debentures, etc.). 
  6. Standard Assets: Standard asset shall mean the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem or carry more than normal risk attached to the business.
C. Eligibility for resolution under this Policy:

The Company shall take into consideration only the Eligible Borrowers for the purpose of considering and implementing the resolution plans. However, it is necessary that the Eligible Borrowers account is classified as Standard Asset as on the Date of Invocation.

Keeping in view the RBI guidelines issued from time to time, the Board will consider and provide suitable resolution/restructuring plans for the Eligible Borrowers as mentioned in Annexure 1.

D. Timelines for resolution

The resolution plan for the Eligible Borrower account under this Policy shall be invoked latest by September 30, 2021 and must be implemented within 90 (Ninety) days from the Date of Invocation.

E. Implementation of resolution (also known as “Date of Implementation”)

A restructuring of loan would be treated as implemented upon fulfilment of all of the following conditions:

  1. All related documentation, including execution of necessary agreements between the company and borrower / creation of security charge / perfection of securities are completed; and
  2. The new structure and / or changes in the terms and conditions of the existing loans get duly reflected in the books of the company and the borrower
  3. The Eligible Borrower is not in default with the Lender as per the revised terms and conditions.
F. Due Diligence Process

The Company on receipt of a request from the Eligible Borrower, shall evaluate the proposal for restructuring of the personal loan account(s). The request application shall be required to be submitted by the Eligible Borrowers along with the requisite supporting documents, which may vary from case to case to review the application.

On due evaluation of the documents submitted by the Eligible Borrower, the concerned team of the Lender shall execute with the Eligible Borrower necessary amendment agreement or other necessary documents in order to record the revised terms and implement viable resolution plan(s) as provided in Annexure 2.

G. Prudential Norms:
    1. Disclosure in the Financial Statement: The Company shall make appropriate disclosures about the restructured accounts in terms of this Policy in its annual financial statements in the format provided in the notification
    2. Credit Reporting by the Company: The credit reporting by the company respect of borrowers where the resolution plan is implemented, the account shall reflect the “restructured due to COVID-19” status of the account.
H. Miscellaneous:
  1. Display on Website: The Board approved policy on restructuring of stressed assets will be hosted on the Company’s website for our customers information and benefit.
  2. Effective date: This Policy shall be effective from the date of approval of this Policy by the Board.
  3. Review of Policy: The Policy shall be reviewed as and when required by the applicable rules and regulations.
For and on behalf of Nahar Credits Private limited

Annexure 1

Eligible Borrower:
  1. Individuals who have availed of personal loans excluding the credit facilities provided by the company to own personnel/staff.
  2. Individuals who have availed of loans and advances for business purposes and the aggregate outstanding exposure across lending institutions does not exceed Rs. 25 crore as on March 31, 2021.
  3. The borrower’s account was a ‘standard asset’ as on March 31, 2021.
  4. Borrower should be impacted on account of Economic fallout due to COVID-19 related stress
  5. The Borrowers whose earnings are not likely to be regular enough to service their Loan Instalments (Principal plus interest).

Annexure 2

Type of restructuring

The Company offer two types of Restructuring Terms to the customers, i.e. Hard Restructuring & Soft Restructuring based on risk Classification of the customers (High, Medium and Low Risk bands) and revised Fixed obligation to income ratio levels based on certain projected stress on the customer income/ Collection contactability, depending on DPD of lenders.

  1. Revision in interest rate: Same as the existing loan.
  2. Revision in Tenure
    1. Hard Restructuring – targeted at customers facing high financial stress:
      • Revised tenure of restructured loan = 1.5 x residual tenure (rounded to nearest month)
      • Min incremental tenure offered from 4 months
      • Max incremental tenure offered upto 6 Months
    2. Soft Restructuring – targeted at customers facing low to moderate financial stress:
      • Revised tenure of restructured loan = 2 x residual tenure (rounded to nearest month)
      • Min incremental tenure offered from 4 months
      • Max incremental tenure offered upto 9 Months

Version Control Table

Version No. Version Approval Date Version Effective Date Version Change Details Version Owner Version Approved By
1.0 02.06.2021 03.06.2021 First version Legal & Compliance Board of Directors